Soft Asia-Europe spot rates will harden as peak season approaches

Posted by Richard Strauss

There was evidence this week of continued softer Asia-North Europe freight rates just ahead of the peak season.

Container spot rates on the route have been ticking down for a number of weeks, and yesterday CMA CGM published new FAK (freight all kinds) rates, valid from 1 August.

At $1,150 per 20ft and $2,200 per 40ft are $100 per container lower than its current FAKs.

Meanwhile, this week’s Shanghai Containerized Freight Index (SCFI) shows another dip in spot rates for North Europe, declining 2.1% to $919 per teu.

And with PSS (peak season surcharges) now in effect by the majority of carriers, the rate erosion is “unexpected”, said Drewry.

Nevertheless, the consultant said it expected rates to rise in the coming weeks.

“More rate hikes and prudent supply during the peak season should lift rates from August,” Drewry said this week.

However, on the transpacific tradelane, it warned “a slow start to the peak season” was “weighing down” eastbound rates. Indeed, for Asia to the US west coast, there was a further fall in spot rates this week, falling 3.1% to $1,226 per 40ft.

But for US east coast ports the SCFI was virtually unchanged on the week, down just 0.8% to $2,233 per 40ft.

Drewry’s World Container Index (WCI) this week is up 15% on the same period of a year ago, reflecting the overall improvement across all trades for carriers.

Katherine Barrios, chief marketing officer at ocean freight benchmarking firm Xeneta, said its crowd-sourced data showed the market “continuing to pick up” and that long-term contract rates were “expected to continue increasing”.

“Short-term and long-term markets behave differently; this year the short-term market moved down and then picked up, whereas the long-term market has moved substantially up over the last 9-12 months,” said Ms Barrios.

She explained that the difference in behaviour was due to contracts on the long-term market expiring less frequently.

Ms Barrios also noted that the average on the short-term market was almost four times higher than a year ago, which “could be a windfall for shipping lines”.

Notwithstanding the much improved trading conditions on headhaul routes compared with 2016, carriers will also benefit from higher backhaul freight rates. According to the WCI, spot rates from Rotterdam to Shanghai were up 1% week-on-week to $1,369 per 40ft, a massive 123% higher than a year ago.